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BHP link to impounded Japanese ship

James Chessell

The Baosteel Emotion and its $20 million cargo are expected to complete its journey to Shanghai. Photo: Reuters

The Japanese ship caught in the middle of a high-stakes dispute with China linked to the war of 1937 was carrying iron ore produced by BHP Billiton's mines in the Pilbara.

Fairfax Media can reveal the Melbourne-based resources heavyweight was indirectly involved in the protracted legal battle that came to a head last week when a Shanghai court ordered the seizure of a Japanese ship owned by Mitsui OSK Lines.

It is understood Mitsui's 230,000-tonne Baosteel Emotion had begun its journey in Western Australia at BHP's Pilbara iron ore operations.

The massive vessel was impounded for almost a week at Majishan port in Zhejiang province before the Japanese company paid nearly $US40 million ($43.1 million) to have it freed on Thursday.

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The dispute made headlines around the world and marks the first time a Japanese company's assets have been seized in China over legal claims for compensation for wartime deeds.

While both countries described the incident as a commercial matter, it once again raised the strained diplomatic ties between China and Japan.

The two Asian superpowers are embroiled in a territorial dispute over a chain of uninhabited islands in the South China Sea while visits by Japanese politicians to a Tokyo shrine honouring that country's war dead have caused tensions.

It remains to be seen if the Shanghai Maritime Court ruling could result in more seizures of Japanese ships.

The Baosteel Emotion and its $20 million cargo are expected to complete the journey to a steel mill in Shanghai after being released. BHP was not financially exposed to the diplomatic incident. The iron ore is considered sold once it is loaded on to the ship in WA.

However, big iron ore miners such as BHP, Rio Tinto and Vale of Brazil are watching relations between Japan and China carefully given they are two of their most important customers.

The Shanghai court's decision over the Baosteel Emotion was taken up by Chinese activists fighting for what they believe is delayed reparations from Japan for pre-World War II deeds.

Reuters reported veteran Chinese activist Tong Zeng saying there were at least 10 other cases either in courts or going to be lodged. ''This is just the beginning,'' Mr Tong said.

Mitsui said the seizure dates back to 1936 - three years before full-scale war between China and Japan broke out - when one of its subsidiaries chartered two freighters from a Chinese ship owner.

The freighters were commandeered by the Japanese government and later lost at sea. The Chinese ship owner commenced legal claims against the Japanese government in 1964.

"Many of the major Japanese companies like Mitsubishi or Mitsui have existed through back to the pre-war era and could all be implicated in one way or another," Shogo Suzuki, an expert on China-Japan relations at the University of Manchester, told Bloomberg.

"Japanese companies can't extract themselves easily at this stage so I think they'll be quite worried."